Thread: Remittances help other countries grow

Remittances – Statistics and Facts Oct 07 Posted by Sagar in Remittance

As per the Remittances Stats, one in every ten people around the globe is directly associated with remittances. The U.S. is the largest remittance source country that witness outflow of $42 billion annually. Among the various regions of the world, the Latin America has the largest and fastest growing remittance flow. It received approx 40% of remittance sent to developing countries. In fact, the remittance to Latin America exceeds the foreign investment and development aid. The economy of the Latin America depends largely on the remittances flow. The rapid increase in Latin America is gradually slowing with more Latin American immigrants are adopting U.S. society and thus sending less money home.

The Migrants who are earning into foreign locations remit on average 12.6 times a year. The average remit amount is in the range of $150/200/250 every time. These remittances are used by the family, friends or relatives in the home country for their daily expenses. These remittances make up to 10% of their household income. A quarter of remitters usually send money their earned money home first, prior to paying their own bills. The remittance rates have shown good growth in spite of downfall of U.S. economy.

Generally, the remittances increase at times of the slow economy of home country where it can be used as an effective anti-poverty tool. These remittances promote the economic growth, community development and increased investment in home country. Moreover, remittances can also lead to inflation and higher interest rates. As per the remittances data, nearly 46% of all Hispanics that are born outside US, send money to their home country. Nearly, 57% of immigrants from El Salvador send remittances and around 60% of U.S. remittance senders are male. Around 64% of people who are employed constitute unskilled labourers and 45% say they would go back to their home country

http://www.remittance.in/remittances-st ... facts.html

Taxing remittances is not a good idea

Remittances sent by migrants have become a massive financial resource flow for developing countries with over $300 billion received annually. While most governments have encouraged efforts to increase these hard-currency flows through formal channels, some are considering taxing remittances as an additional source of revenue.

A few receiving countries already tax remittances, often through indirect means. For example, remittances sent from the US to Cuba can only be paid to recipients in Cuban Convertible pesos (CUC) or Chavitos with a tax of 20 percent for conversion of US$ to CUCs. The US government and a US senator called upon Cuba to repeal this tax when the US lifted restrictions on sending remittances to Cuba. Other countries that have a parallel market premium with an overvalued official exchange rate, e.g., Ethiopia, Pakistan, and Venezuela to name a few, also implicitly tax remittances when they require recipients to convert remittances to local currency at uncompetitive official exchange rates. Philippines used to impose a small Documentary Stamp Tax (DST) of 0.3 pesos for every 200 pesos, but this was scrapped in November (see article).

Some destination countries also tax remittances but for different reasons. Oklahoma state in the US taxes remittances sent through money transfer companies – a fixed tax of $5 for amounts sent up to $500 and 1 percent above that (see article). Legal residents and citizens can apply for refunds when filing state taxes, so this tax appears to target undocumented migrants who are perceived to be putting a burden on public services. (Remittances sent through banks or credit unions are exempted.) Kansas is reportedly considering imposing a similar tax.

There are several reasons why taxing remittances is a bad idea:

• A tax on remittances is additional to income and sales taxes already paid by migrants. Imagine New York taxing the remittances of an employee who came from Washington! Or New York taxing this worker’s Christmas gifts sent to family members in Washington!

• A remittance tax would immediately reduce the incentive to send remittances and the amounts received by the beneficiaries, and ultimately the development impact of remittances.

• A remittance tax would also drive these money flows underground. A shift of flows to informal channels can hurt efforts to leverage remittances for increasing access of recipients to formal financial services (financial inclusion) and to raise financing for infrastructure and other development projects (e.g., the recent US BRIDGE initiative).

• Such a tax is difficult to administer as remitters can resort to using informal channels. Also such a tax is highly regressive. And they produce huge deadweight losses as remittances are highly cost-elastic.

The action of the Philippines to eliminate the DST is commendable. Even though it will lose some revenues in the short run, the gains from increased remittances could easily outweigh the losses. Other countries that require recipients to exchange the remittances at overvalued official exchange rates should consider relaxing these restrictions.

Measures to appropriate some fraction of resource flows that have recognized development and poverty reduction impacts could prove counterproductive. Instead, facilitating remittances by reducing transaction costs and increasing transparency and competition, and leveraging these flows to increase access to finance of households and the capital market access of countries, can benefit both the migrants and their countries of origin.

http://blogs.worldbank.org/peoplemove/t ... -good-idea

Outlook for Remittance Flows 2011-13

excerpt from the pdf: Officially recorded remittance flows to developing countries recovered quickly to $325 billion in 2010 after the global financial crisis. But they have not kept pace with rising prices in recipient countries. Remittance flows are expected to grow at lower but more sustainable rates of 7-8 percent annually during 2011-13 to reach $404 billion by 2013.
• Remittance flows to Latin America are growing again in 2011 because of the stabilization of the U.S. economy.

http://siteresources.worldbank.org/EXTD ... rief16.pdf

The OK tax is one I would be happy to see the US raise.

A quarter of remitters usually send money their earned money home first, prior to paying their own bills. The remittance rates have shown good growth in spite of downfall of U.S. economy.

Ka-ching! Why shouldn't they? They get all taxpayer funded bennies they can lie, cheat and steal from.

If remittances are not used wisely they make recipients grow dependent.

"Get em' the **** outta here once and for all!"

Looking at this over time, about $420 billion left our economy over the last ten years, which is slighty more than 50% of the ARRA (stimulus). And this will continue and increase as we bring in a million immigrants every year.

Unlike ARRA, natural born citizens of natural born parents in the US have fewer ties outside the country, so money would be spent here. As consumer spending is a big driver of US economy, keeping money here is one sure way to help improve the economy.

I do not know if remittances are included in the calculations for the cost of legal and illegal immigrants, but my impression is they are not. Including remittances would make a stronger case for not only enforcing immigration law, but reducing overall legal immigration. And would knock out the arguments of those who want to increase overall immigration.

What I just don't get is why there is so little discussion of the hemorraging in this area of US economy due to current policy. Remittances only increase as more immigrants are brought in annually and citizens who would be working and keeping money here are kept unemployed through competition and lack of enforcement.

Originally Posted by miguelina

A quarter of remitters usually send money their earned money home first, prior to paying their own bills. The remittance rates have shown good growth in spite of downfall of U.S. economy.

Ka-ching! Why shouldn't they? They get all taxpayer funded bennies they can lie, cheat and steal from.

I wouldn't doubt some of the remittances are being sent home so that their family can deposit it into a bank account in their home country on their behalf. That way they can save for when they come home one day and they avoid having to report it as assets to welfare.

They don't help our country grow. That is the Country I am most concerned about.